Exam 19: The Audit of Accounting Estimates: Basic Material Relating to Accounting Estimates

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The tendency to value what we have because it is ours,regardless of its intrinsic value,is known as the ________.

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The tendency to exaggerate the inevitability of causal sequences is known as the ________.

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The susceptibility of an accounting estimate and related disclosures to an inherent lack of precision in its measurement is referred to as ________.

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Which of the following statements regarding the risk-based reasoning (RBR)matrix is FALSE?

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In CAS 540,quantified uncertainty is referred to as probability or risk.

(True/False)
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Accounting estimate nirvana occurs when the width of the reasonable range is less than or equal to the material misstatement,which means that there is no significant risk for any estimates within the reasonable range.

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Under Canadian audit standard CAS 706,the auditor may decide to place a "red flag" paragraph drawing attention to the uncertainty in the report.If there is material uncertainty about the going-concern assumption,for example,then CAS 706 requires that an emphasis of matter paragraph be added even when there is proper disclosure in the financial statements.Under what circumstances would uncertainty situations cause audit reports to be qualified for departures from GAAP?

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Misstatements are defined as the difference between ________ and the nearest point of the reasonable range.

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Uncertainty situations may cause audit reports to be modified (qualified)for departures from GAAP.

(True/False)
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Which of the following statements regarding the going concern concept is FALSE?

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